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FCA to take action over unsuitable pension transfer advice
| Published: | 7 Dec at 6 PM |
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According to the UK’s financial watchdog, less than 50 per cent of pensions transfer advice given to Britons is suitable for individuals’ circumstances.
The findings of a Financial Conduct Authority study of advice given on pension transfers were released yesterday, giving cause for concern amongst Britons looking to spend their retirement years as expats living outside the UK. Just 48.1 per cent of advice given was considered by the FCA to be suitable for those considering a pension transfer. The watchdog examined 18 firms and the advice they’d given to a total of 48,248 clients concerning their defined benefit pension schemes, with the advice resulting in 24,919 pension transfers between April 2015 and the present day.
As a result of its study, the FCA is especially concerned that firms are not giving reliable guidance to clients in spite of previous feedback from the regulator. The study's parameters were based on targeted work in the pension transfer sector, although general advice on investments and pensions in 2017 was deemed suitable. Finally, the regulator stated it’s unacceptable that crucial advice on pension transfers should persistently remain at a low level of suitability. The authority now expects firms marketing pension transfer products to review their approach to risk management in order to make certain their clients are not caused personal harm due to poor advice. Firms, it adds, must act immediately to make necessary changes.
Problems identified by the study included transfers being recommended even although client circumstances and needs would have been better met by retaining an existing defined benefit pension. The City watchdog is now warning financial advisors their starting point for advice should be that pension transfers are not generally suitable unless specific circumstances suggests a transfer is in the client’s best interest. The FCA is ‘disappointed’ that firms in general who were aware of its concerns had not taken steps to address the issues examined by the study, with the authority making in clear that cimpanies failing to review their business models and amend them if necessary can expect serious consequences.
The findings of a Financial Conduct Authority study of advice given on pension transfers were released yesterday, giving cause for concern amongst Britons looking to spend their retirement years as expats living outside the UK. Just 48.1 per cent of advice given was considered by the FCA to be suitable for those considering a pension transfer. The watchdog examined 18 firms and the advice they’d given to a total of 48,248 clients concerning their defined benefit pension schemes, with the advice resulting in 24,919 pension transfers between April 2015 and the present day.
As a result of its study, the FCA is especially concerned that firms are not giving reliable guidance to clients in spite of previous feedback from the regulator. The study's parameters were based on targeted work in the pension transfer sector, although general advice on investments and pensions in 2017 was deemed suitable. Finally, the regulator stated it’s unacceptable that crucial advice on pension transfers should persistently remain at a low level of suitability. The authority now expects firms marketing pension transfer products to review their approach to risk management in order to make certain their clients are not caused personal harm due to poor advice. Firms, it adds, must act immediately to make necessary changes.
Problems identified by the study included transfers being recommended even although client circumstances and needs would have been better met by retaining an existing defined benefit pension. The City watchdog is now warning financial advisors their starting point for advice should be that pension transfers are not generally suitable unless specific circumstances suggests a transfer is in the client’s best interest. The FCA is ‘disappointed’ that firms in general who were aware of its concerns had not taken steps to address the issues examined by the study, with the authority making in clear that cimpanies failing to review their business models and amend them if necessary can expect serious consequences.
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